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Tackle Today: Rule building exercise

August 4, 2020

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Answer these 4 questions


Over time, we have had a lot of interaction with new traders. One issue that routinely pops up is that there seems to be a lack of clearly defined rules for entry, targeting, stop losses and position sizing, even amongst the basic trading systems like stocks, day trading, futures, or forex.  Delta systems.

Here is an exercise. Ask and answer these questions:

– When and why will you buy a directional swing trade?  

– Where will you target, and how will you manage your trade as it moves towards your target?

– Where do you place your stop loss, and how do you manage it as your trade develops?

– How do you determine your position sizing?

Do you have clearly defined rules?  This can be written out for breakouts, retracements, or other systems. It is an especially important exercise to write down your rules.

Dr. Van Tharp, who wrote one of my favorite trading books of all time ‘Trade Your Way to Financial Freedom’ says that you do not trade the markets, you trade your beliefs about the markets.

I know two expert traders, who I have taken courses from, that personify this statement.  The one uses multi-legged option spreads that are based on Gamma, Vega, Theta, and Delta rules.  They are overly complex.  He is overly complex, and he likes math and complexity.  Complexity, to this trader, is a way to develop an edge in the market.  

I know another trader, that after 20+ years of trading, he still only buys stock, shorts stock and trades directionally.  He likes the simplicity.  Simplicity is his way to build an edge in the market.

The only method that matters, is the one that helps you build your edge, as you also will trade your beliefs about the market. 

Your rules can be quite simple, and work.  They can be overly complex, and work.  But they must be defined to work consistently.


Chart of the Day

NFLX Daily Chart

NFLX was a candidate on this week’s Options Report on the bull watch list.  Review the entire list and watch the report here: https://tackletrading.com/options-report-august-1st-2020/

Video of the Day

Swing Trading 101 Webinar Replay

Coach Matt teaches the basics of Swing Trading in this webinar. 

Today’s line up

Traders Lounge 11 AM EST

Join the coaches in this live lounge, ask questions, discuss ideas or just sit back and listen to veteran traders discuss market conditions.

The Coaches Show 8:30 PM EST

This is our weekly MasterMind group. Join the coaches tonight, 8:30pm EST to discuss the markets and help you prepare for the week.

Halftime Report 12:30 PM EST

The Halftime Report starts at 12:30 EST and covers what news is driving the market, chart analysis from the movers and shakers of the day and fun in a way that only Matt and Tim can deliver.

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